I started a list below of the benefits of a bear market in stocks. Why am I doing this? To raise optimism, or rather, to remind people that the world is not ending and that this current financial crisis will pass. There are so many doom and gloom conversations being started on this forum that I felt the need to look past the short-term and reiterate the fact that all bear markets eventually end - and this one will too.

Here is a start. The benefits of a bear market are:

1) You can buy much more stock for the same dollar invested.
2) You learn what your true risk tolerance is.
3) More media attention on the markets means less media attention on the election.
4) Lower interest rates helps people buying homes or refinancing.

Please add your own POSITIVE thoughts on the markets or on the economy. Pessimists, please do not post. You have have plenty of doom and gloom conversations to post negativism.

Thanks for your optimistic list. In general I quite agree with you, at least for folks in the accumulation phase of their investing lives. Not sure you could convince a less-than-well-heeled retiree that a bear market is good for her, though.

Anyway, my further two cents:

RickFerri wrote:1) You can buy much more stock for the same dollar invested.

That's for certain. If you're in the position to sink some $ into equities then buying low definitely beats buying high, as long as you have the stomach for it. And speaking of tolerance...

RickFerri wrote:2) You learn what your true risk tolerance is.

Again, right on the money. As for me, I know my risk tolerance has been tested before so I know what I can take and what I can't. But for those who've never been there, there's no substitute for getting a true taste of a down market (changes those handy dandy risk tolerance questionnaires from purely hypothetical to something a bit closer to reality).

RickFerri wrote:3) More media attention on the markets means less media attention on the election.

Definitely in the short run, at least. Of course, it's bound to change the focus of the election, too. So, now when we see the candidates they'll be telling us this, that and the other thing about the economy and the financial markets, etc., instead of focusing on the many other issues out there that bear (pardon the pun) on the election.

You sure know more about this stuff than me, and I'd suppose without researching it, that it'd be true in a "normal" bear market. But, geez, I've been looking into refinancing for several months, and just when I thought mortgage rates would decline ... uh, no, they are rising. From the man on the street perspective, mortgage rates are pretty much SNAFU right now.

On the whole, however, I side with your larger point ... "this, too, shall pass."

A bear market gives an equity investor who holds cash in their AA opportunities to buy cheaper stock without selling bonds or other investments. Low interest earnings are a small price to pay for this future opportunity.

1) …you can tax-loss harvest to improve future tax efficiency
2) …a first hand demonstration of which asset classes provide the best hedge for these types of market conditions
3) …a clear demonstration that smart people can often get it badly wrong
4) …opportunities to shift into ‘better’ investment products at lower cost (lower costs basis).

Rick,
I have a slightly different approach, it’s more personal rather than market driven:
1. Reassess employment opportunities, went back to school learned more skills and credentials to get promoted.
2. Worked a little longer and harder, took employment risks to earn more money and actually do what I love.
3. Reaffirmed my values of massive self discipline, stay the course, not panicking.
4. Acknowledging that only mistake I made was not diversifying and painfully learning from that one mistake that cost us big time.
5. Humbling acceptance that BALANCE in one’s life and the life of a country is good for long term grow and prosperity.

BTW, Interest rates for home buyers have actually went up slightly according to news reports. Of course, who believes the news?

As a retiree, this market downturn (which, by the way, remains a blip compared to others I've experienced) has not affected our lifestyle in any way. There's just nothing like the predictability and reliability of annuity income together with all the other bells & whistles that make up an asset allocation plan.

Bear markets lower valuations, thus boosting future long term returns. Actually I was getting tired of my portfolio being in a narrow range of value. Now as it declines, I see things starting to move out of that range, so I know that the future holds a higher value portfolio for me.

But seriously, it reminds us to appreciate it when times are good (and when you think about it, times are not so bad anyway...from a financial perspective...if you have done your asset allocation homework correctly.)

Optimists?
Pessimists?
Silly language.
How about realists?
Despite all the historical "scientific" studies and simulations, no one knows what will happen to the long-term economy as a whole, because we are, as is sometimes the case, in uncharted waters.
Though maybe you'd like to ask those losing their job or house if it's really such great news.
If being risk-averse is "pessimism", count me in. Based on political and economic realties, I figured this was coming, and starting in early 2001, put about half of my stock holdings into the Vanguard total international fund, then the rest to domestic indexes and stocks with a heavy tilt to oil and defense. I didn't guess perfectly, but it has done OK - so far.
I'm now invested 25% in the market, 75% in bonds and cash, with sufficient capital for retirement and SS, so it may be no big deal to me. (The wisest advice you can get is Swedroe's: Take no more risk than you have to. So I should probably be out of the market even more.)

1. Instead of dining out, had potluck get-togethers & bonded with friends through it
2. Appreciated the value of a bagged lunch
3. Instead of going out, stayed in and played old-fashioned board games
4. Reassessed my job, my career, my life
5. Made longer-term goals - applied for a masters degree program and just completed it, along with a career change; started playing tennis, won my first singles tournaments last year
6. Just learned more about investments, as the excesses were worked out
7. Worked out my own non-financial excesses
8. Enjoyed the weather and everytyhing else that is free

If you've had your eye on buying a great mutual fund, but disappointed that it had closed its doors to new investors, chances are that it will soon reopen during this market decline as investors pull their money out in fear.

1.) First priority is to pick up more shares on the cheap side! Continue to invest through good and bad markets!!

This is actually my first "Bear Market" where I have some "skin" in the game, so to speak. I had a portfolio worth an once or two of gold back then!! This is great for the young investors that have started within the past 5 years!!

As of March 13, the day before Bear revealed its stricken state, among 15 analysts surveyed by StarMine Corp, a unit of Reuters, five rated Bear "buy" or the equivalent, while 10 rated it "hold." None rated it "sell."

Bear markets make you feel the pain of your mistakes, make corrective actions and help you learn that you the only one responsible for your decisions. Pain that was a result of your mistakes, eventually turns into wisdom. It doesn't happen any other way. There are no shortcuts. You have to experience this through a bonified bear market.

In the short term, it is terrible, horrific experience, but if you keep at it by reading, talking to people and learning more, the terrible times turn into the greatest benefit of all---Wisdom and perhaps a little more money the next time around.
Steve